9.1 Find the following values for a single cash flow: a. The future value of $50

Question

9.1 Find the following values for a single cash flow:

a. The future value of $500 invested at 8 percent for one year.

b. The future value of $500 invested at 8 percent for five years.

c. The present value of $500 to be received in one year when the opportunity cost rate is 8 percent.

d. The present value of $500 to be received in five years when the opportunity cost rate is 8 percent.

9.2 Which of the following statements about common stock is incorrect? Stockholders exercise control over the company by voting for board members. The pre-emptive right gives current stockholders the right to purchase any new shares issued by the company. Common stockholders are the owners of for-profit corporations. In the event of bankruptcy and liquidation, shareholders often receive nothing. The claim of shareholders on the cash flows of the firm is limited to the dividends that they receive, i.e., they have no claim on a business's residual earnings.

Explanation / Answer

9.1

a.500*(1+0.08)=540
b.500*(1+0.08)^5=734.66
c.500/(1+0.08)=462.96
d.500/(1+.08)^5=340.29

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